Industry expects TALF extension to commercial market within weeks

The head of a national real estate trade association told executives attending a Real Estate Board of New York-sponsored panel discussion this morning that the federal government would announce within weeks that the Term Asset-Backed Securities Loan Facility (TALF) program would be extended to commercial real estate.

Jeffrey DeBoer, president and CEO of the Real Estate Roundtable, said Washington realized a credit crisis was looming in the commercial credit market and needed to provide liquidity so lenders could avert the crash.

Investors such as pension funds and private equity firms could get financing from TALF to buy newly issued bonds with the most secure AAA rating, which would help determine pricing in the market. The bonds would help provide so-called price discovery because the other elements of financing can be priced with the AAA bonds as a point of reference.

“We do expect a formal announcement from the government in the next few weeks,” DeBoer said. Realizing that there were reporters were in the room, he quickly changed his tune, saying the announcement would hopefully come in the near future.

DeBoer said rolling loans totaling about $2 trillion were coming due by 2012, banks are barely lending and the stalled securitization market is effectively shut down. To avoid a disaster, he said a federal credit agency is called for.

The banks cannot lend at that level again and “we don’t expect the CMBS market to come back in its old ways any time soon. So we said we need a credit facility; in other words — in effect — a gigantic credit card that would help finance new loans, new originations,” he said.

He spoke at the REBNY offices in Midtown on a panel discussing the three federal programs aimed at restarting lending: TALF, Troubled Asset Relief Program (TARP) and Public-Private Investment Program (PPIP).

Sheridan “Schecky” Schechner, managing director at Barclays Capital, said at the same meeting that federal regulators may strong-arm smaller banks to participate in the legacy loan program, with threats of closing them down if they do not.

“You know, Mr. Bank, we think it is a good idea for you to lower your asset pool or we are going to shut you down, so go sell. So we are not telling you what to do. But the alternative is… death,” he said.